“Solid growth momentum leaves the New Zealand dollar in no man’s land versus the United States dollar (hiking Fed) but strong on the crosses”.
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Brent and USA crude oil prices fell and remained near multi-year lows after fresh supply builds at the delivery point for US crude futures added to worries about a global glut and strength in the dollar.
Moves in short-term U.S. Treasuries were modest, After touching 1.021 percent on Wednesday, a 5-1/2 year high, yields on two-year notes US2YT=RR were last at 0.9966 percent.
Fed chair Janet Yellen said the decision “recognises the considerable progress that has been made toward restoring jobs, raising incomes and easing the economic hardship of millions of Americans”.
Stocks in Europe gained as investors overseas took the Fed rise as a sign of confidence in the world’s largest economy.
REACTION: JPMorgan Chase, the biggest bank in the U.S.in terms of assets, said its prime rate will rise 0.25 percentage points to 3.5 percent tomorrow.
“The Fed is more hawkish than the market has been on where interest rates will be at the end of 2016”, said Chris Gaffney, president of EverBank World Markets in St Louis. The steady decline puts pressure on other Asian currencies to depreciate to stay competitive.
Analysts said some traders’ surprise that the Fed’s rate forecasts, or “dot plot”, did not come down to reflect a more dovish path of hikes into 2016 continued to support the dollar.
The euro fell to as low as $1.0832, before recovering to $1.0863, still down half a percent on the day. The euro edged up to $1.0931 from $1.0917 late Thursday while the dollar rose to 121.87 yen from 121.73 yen.
METALS: The price of gold rose $15.20, or 1.4 percent, to $1,076.80 an ounce and silver jumped 47.8 cents, or 3.5 percent, to $14.25 an ounce.
Finally, in Latin America, the dollar also traded higher against the Chilean (up 0.08%) and Mexican (up 0.66%) pesos.
Richard Franulovich, a currency strategist at Westpac, noted that historically the dollar tended to soften during the start of Fed tightening cycles.
The recovery in oil prices and short covering rally ahead of the US Fed meeting have boosted the stocks on Asian bourses, observes FX Street.
Within Asia, Japan may have the most to gain from the Fed’s shift, since higher US interest rates are likely to push the dollar up against the yen, helping Japan’s exports.
But the rate hike, which had been widely expected by market participants, gave some traders a cue to sell the USA unit in order to close their earlier positions and lock in profits.
Pioneer Natural Resources lost $7.34, or 5.1 percent, to $137.26 and Devon Energy dropped $1.28, or 4 percent, to $30.59.
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Both the Reserve Bank of Australia (RBA) and Reserve Bank of New Zealand (RBNZ) already have interest rates at record lows so are reluctant to cut further for fear of stoking what many think are housing market bubbles.
